$435M FOR A SEAT AT THE TABLE

Few jurisdictions are less attractive than Illinois from a casino investment standpoint. Yet there were no shortage of bidders for the State’s 10th and last license. Bids ranged from $60 million (dumb) to $435 million (and dumber). And that’s just for the right to operate a casino in this socialist state. Never mind land and construction costs.

Assuming the $435 million bid wins (loses), the all in investment cost will certainly approach $1 billion. I don’t think there is one existing Illinois casino property that will generate more than $55 million in EBITDA this year, and likely less next year. Even if the new casino can drive $100 million in the face of the most onerous tax structure, a 100% smoking ban, and an uncertain consumer environment, a 10% ROI is not very appealing.

The only encouraging take away is that no public gaming entity even bothered to enter a bid. BYD, PENN, and WYNN are the only companies with the actual resources to even face that decision. They all made the right one.